If, During the Performance of a Contract, Extraordinary Difficulties Arise

question 52

True/False

If, during the performance of a contract, extraordinary difficulties arise that were totally unforeseen at the time the contract was formed, a court may allow an exception to the preexisting duty rule.

---

Definitions:

Expectations Theory

A theory suggesting that long-term interest rates reflect the market's expectation for future short-term rates.

Liquidity Preference Theory

Theory that investors demand a risk premium on long-term bonds. Implies that the forward rate generally will exceed the expected future interest rate.

Treasury Bond

A Treasury bond is a long-term, fixed-interest government debt security with a maturity of 20 to 30 years and pays interest every six months.

STRIPPED Cash Flows

Cash flows that are separated or "stripped" from an asset for investment or valuation purposes, often for the construction of zero-coupon bonds.